Are We Making Progress?

by Hank Boerner – Chair, G&A Institute

Considering Recent News About “Apparel Fashion and Sustainability” — and the Investor Initiative to Help Make East Asian Factory Workers Safer and Better Paid…

In monitoring the growing abundance of news stories and commentary about “supply chain,” “globalization” or “trade” topics and issues, our editors often see the focus is on apparel, clothing, textiles, fashionand related topics & issues.

Companies in the developed economies widely source apparel footwear and related items in the developing and under-developed nations – and what happens there can quickly make news that travels around the globe.

Example:  The focus five years ago about this time was on the East Asian nation of Bangladesh and the Rana Plaza vertical factory tragedy in the capital city of Dhaka (or Dacca) that killed more than 1,000 garment industry workers.  The labels of leading western nation marketers were scattered about the debris and ashes — and those familiar brand images as well as images of the collapsed building and details of the tragedy helped to focus attention on worker conditions in the East Asian region in both North America and Europe.

The Interfaith Center on Corporate Responsibility (ICCR) investor coalition is keeping the focus on worker safety as the “Bangladesh Accord on Fire and Safety” is renewed for another three years.

ICCR institutions and their investor allies organized as “The Bangladesh Investor Initiative” (with collective AUM of US$4.5 trillion) on the 5th anniversary are urging a stronger corporate response and demonstrated commitment to local worker safety and adequate wage levels.  The link to our blog commentary on recent developments and background information for companies and investors is below.

Some good news to share is that sustainability is catching on in the fashion industry.  The uber fashion magazine from publishers Conde Nast – Vogue, with more than one million readers — just published a story about the embrace of “eco-friendly” fashion, spotlighting “the best designers of a new generation are stitching sustainability into everything they do…”

“While sustainability has long been considered a “byword for hemp-heavy bohemia,” writer Olivia Singer explains, “a new generation of designers is building brands with a more conscious approach to fashion at their core.”

Fabrics are sourced through collectives in India empowering female weavers as just one example.  In the article designers explain why sustainability is important to their brands (Richard Malone, Le Kilt, Elliss, E.L.V. Denim, Alyx, Marine Serre, Richard Quinnare featured interviews).

A number of creative approaches being adopted by the designers is explained — just think about the contribution to global sustainability of turning recycled plastics and viscose into yarn and fringing, using organic cotton as well as recycled polyester for “new” fashions, creating ECONYL from fishnets to make swimwear, and using recycled cotton and plastics as part of the effort of making sustainability a “pillar of luxury”.

The encouraging details are in our Top Story this week – a cautionary note:  some of the fashion photos are edgy and might offend.

Human Resources and Responsible Sourcing: The Melding of HRM and CSR Initiatives

By Erik Plesset

How does the HRM department support “Responsible Sourcing” as part of an organization’s Corporate Social Responsibility strategy and why should it be part of their mandate in building their organizational culture?  Today’s employees, customers and stakeholders now scrutinize an enterprise’s supply chain sourcing which includes environmental standards, product safety and the ethical treatment of workers. And they hold them accountable for the accuracy of what is reported and exposed.  With the shift in accountability being laid on the corporation, “HRM comes to be seen as an implicit steward for good work, not only for the corporation’s direct employees, but also for the people working indirectly for the organization (e.g. through sub-contracting, temporary employment agencies or suppliers).” 1   And if the public decides there is something negative about how a company conducts business, the consequences of immediate and future damage to the company’s brand and reputation depress sales and alienate investors in today’s über-amped-up social media atmosphere.  

 

Growing beyond the sometimes eye-rolling obligation of supporting non-profits or social causes through charitable donations and functioning as a PR tool, CSR now boldly carries the weight of increasing productivity, retaining employees and delivering economic gains that are seen in the price of publicly traded stocks.  With this swing in attitude and perception, HRM has an opportunity to contribute to a triple-bottom line benefiting people, the environment and the fiscal health of the company. They attract and hire those who will carry out the mandates that benefit society from an ethical, environmental and economic standpoint. Being directly involved in developing and enforcing a company’s CSR strategy such as responsible sourcing practices, embedding the concept of sustainable development as a priority in corporate policies and working across internal sectors with the PR and marketing teams, adds to the success of these multi-faceted business practices.  

 

One of the most powerful sustainable resources are the people who show up to work every day, and innovative CSR policies continue to influence employee retention rates.    

  • 78% of 18- to 24-year-olds were more motivated and committed at work if they felt their employer had a positive impact on society
  • 69% of 18- to 25-year-olds and 60% of 25- to 34-year-olds would leave their job for a similar one if that organization had a more positive impact
  • 76 % of participants (of all ages) think organizations should have ethics and sustainability embedded and woven through all departments, not just included as part of a CSR strategy

 

If you are part of a Human Resources department, you have the ability to guide and champion sustainable sourcing platforms.      

 

Sources:  

1  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2716146

2  FROM SB15 London

 

Why Sustainability Matters to Supply Chain Sourcing

By Christy Pettey
Originally published on www.gartner.com

Take these key steps toward successful adoption of responsible sourcing.

Corporate social responsibility (CSR) is rapidly becoming a key market differentiator for businesses as more consumers look to purchase products from companies that act responsibly.

So it comes as little surprise that significant efforts are underway to incorporate sustainability within supply chains. Gartner’s 2017 Future of Supply Chain Survey data highlights how companies view CSR as an opportunity to enhance their brand reputation, rather than just satisfying government regulations. Eighty two percent of respondents say their organization’s intention to invest in ethical sourcing is because “it’s the right thing to do.”

Far from perceiving sustainability as a costly inconvenience, supply chain leaders are using it to their advantage

“With the rise of social media, a spotlight can easily be shined on companies — and their suppliers — that fail to operate in a sustainable way,” says Miguel Cossio, principal research analyst at Gartner. “Far from perceiving sustainability as a costly inconvenience, supply chain leaders are using it to their advantage, as it provides new opportunities to optimize costs and reduce waste.”

Gartner: Sustainable Procurement and Sourcing as Definded by the United Nations

Explain the importance of responsible sourcing

Adoption of responsible sourcing will require supply chain leaders to make sustainability a non-negotiable element that is as important as quality. This in turn will impact how sourcing teams are measured. Performance recognition is often given to sourcing leaders based on cost reduction, yet some of the savings achieved through sustainability will likely be realized outside unit price. For example, changing material specifications to enable better recycling yields may not change the unit price but will still result in savings based on its total cost of ownership.

“Sourcing leadership teams should encourage the incorporation of sustainability objectives into their team’s performance metrics and strike a balance with other financial objectives,” says Cossio. “This will require sourcing leaders to educate internal team members on the importance of CSR for the organization and help them create a story to articulate to suppliers why CSR is now a key factor in sourcing decisions.

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Incorporate CSR in your supplier relationship management programs

Incorporating sustainability in the brand’s value proposition is also likely to affect the definition of what constitutes a valuable supplier for the organization. Suppliers that commit to CSR demonstrate their ability take on a long-term vision, which is an essential component of building strategic relationships. For this reason, supply chain leaders need to revisit their segmentation strategies and reassess their selection of strategic suppliers engaged through their supplier relationship management (SRM) program.

“Clearly communicate the importance of sustainability to strategic suppliers,” advises Cossio. “Provide a clear indication of what is expected from them, how you will measure sustainability performance and a clear timeline for complying with your minimum expectations. Be prepared to provide support to help your suppliers transition.”

Look to existing sources for support

In order to integrate CSR into the strategic sourcing process, supply chain leaders will need to identify and use data from external sources and service providers. A number of sources are available to help outline a responsible sourcing strategy, such as:

  • Competitor activity. Look at what your competitors are doing in terms of responsible sourcing and in what areas of procurement they have implemented sustainability criteria.
  • Industry associations and nongovernmental organizations (NGOs). These organizations have data, key performance indicators and solutions that you can leverage.
  • ISO 20400This is the world’s first international standard for sustainable procurement, which provides guidance to organizations on how to integrate sustainability within procurement.

Why HR Needs To Take A Leadership Role In CSR

By Karen Higginbottom
Originally published on www.forbes.com

Many organizations have invested heavily in corporate social responsibility (CSR) programs  in a bid to restore trust among their shareholders, employees and customers and improve their corporate brand. But what role does HR play in CSR and does the profession need to take a more leading role in deciding the direction of organization’s CSR strategies? Karen Higginbottom investigates..

The history of corporate philanthropy goes back to at least the 19th Century in the UK where the innovative working practices of Quaker organizations such as Cadburys and Rowntree Mackintosh put employee welfare and ethical behavior at the heart of their business values.

The term ‘CSR’ emerged in the 1960s, commented Jonny Gifford, research advisor to the Chartered Institute of Personnel and Development (CIPD). “The term ‘CSR’ became increasingly common in the 1990s, in particular when the spotlight was being shone on poor working conditions in global supply chains,” he said. “CSR or CR (corporate responsibility) has its sceptics as well as advocates but the defining feature is that it activity and standards that companies voluntarily sign up to, separate from legal governance.”

However, CSR became a bit of a buzzword 10-15 years ago, acknowledged Gifford. “Organizations found it easier to turn it into a branding opportunity by having a CSR webpage but wouldn’t necessarily do anything about it.  However, you can only say that you care about CSR for a certain time before you actually have to do something about it as expectations are raised among stakeholders.”

Organizational attitudes to CSR have changed over the last ten years and the term is no longer an acronym which you can put into a box, remarked Gifford. “The more we talk about responsible business practices the better. There are two broad aspects to corporate responsibility:  one is the traditional focus on CSR which is what the organization does with the local communities in which it operates and environmental policies and then activities which are core to the business and how they make their money.”

People play a central role in the value creation process which is about understanding the way an organization works and the consequences of its activities, argued Gifford. “For example, how you treat your customers and how you treat suppliers ethically. If you define your value creation in narrow financial terms, you can develop this very far while maintaining a deep disregard for social responsibility. But a triple bottom line view focuses on long-term value creation and brings this together with a much wider stakeholder view.  This leads organizations to look at what is socially and environmentally sustainable and ethics is integrally linked to value creation.”

Gifford argued that HR profession has a three-fold role in CSR as many aspects relate to HR management. “HR needs to make sure people management practices are ethical and secondly, to embed corporate responsibility you need to give people the right support and training and HR has a role in learning and development side of that. The third aspect is embedding ethics into the organizational culture. That’s about being able at board level to ask the challenging questions.”

The HR function should be totally integrated into CSR, said Judi Marshall, programme director in MA in leadership  for sustainability for Lancaster University Management School. “It’s not always the case as sometimes it’s a marketing tool. The HR function needs to think about leadership, recruitment and reward.  Some of the best organizations have taken an interesting HR aspect to this where they look at the work-life balance of CSR.”

One of the challenges facing organizations when it comes to the impact of CSR is measuring the impact of those activities on the targeted communities, said Professor Kamel Mellahi, professor of strategic management at Warwick Business School. “CSR differs from any other corporate activity. It deals with issues like environmental pollution, child labor and product safety which are often seen as outside the traditional boundaries of a business. Therefore it’s not easy to measure CSR performance by using traditional indicators such as return on investment. Effective measures of CSR must consider economic, social and environmental impact.”

Embedding corporate responsibility into a business is about making it an integrated part of the culture of the organization, added Gifford. “Now HR is ideally placed to gauge organizational culture, understand it and change it.”

HR could play a much more prominent role in an organization’s CSR strategy, agreed Professor Mellahi. “HR hasn’t taken ownership of HR issues associated with CSR. These have become management team issues such as a governance and diversity. HR is only taking a supporting role but it ought to champion it and the profession has an excellent opportunity to take a leadership role in CSR.”

Research indicates that HR is very rarely involved in devising CR strategy. The CIPD’s report The Role of HR in Corporate Responsibility surveyed 353 HR professional and 523 middle and senior managers and found that only 13% of business leaders reported that HR was responsible for setting CR strategy. When it came to implementing CR strategy, only 26% of business leaders thought that HR was responsible for implementation.  The report revealed that the biggest driver for an organization’s increased focus on CR was greater pressure from governments or regulators.

It’s time for the HR profession to move out of the shadows and take an active role in an organization’s CSR strategy.  Many elements of a CSR strategy involve people and it’s an opportunity that the profession should grasp now.

Rapidly Changing Technology is a Critical Component of Sustainable Sourcing